Azerbaijan Finally Unfreezes Soviet Savings

When Javanshir Aghamaliyev was a boy in Soviet Azerbaijan in 1986, his parents established a trust fund for when he turned 18. 

By early 1992, his account in the state-owned Sberbank, which had branches across the Soviet Union, had 8,000 roubles in it. But by then, the Soviet state had collapsed and Azerbaijan was a separate country. Hyperinflation slashed the value of the rouble and the authorities froze bank accounts like Aghamaliyev’s.

Two decades on, Aghamaliyev is about to be get access to some of the cash at last, but he is far from happy with what he will actually receive. Like many who entrusted money to Sberbank, he says the payout on offer represents only a fraction of his savings. He expects to receive 832 Azerbaijani manats, equivalent to 1,060 US dollars.

In the Soviet planned economy, the rouble exchange rate was officially set at one to one with the US dollar. Many account-holders believe the Azerbaijani government should have honoured this nominal exchange rate despite currency devaluations and the switch from roubles to manats.

“Eight thousand roubles was enough to buy the most expensive car at that time,” Aghamaliyev said. “Now I can’t even buy the cheapest one.”

Soviet citizens were encouraged to open accounts in Sberbank, and since there was little to buy in the shops, many did so in order to save up for big purchases or holidays.

When the Soviet system broke up, Azerbaijan’s Capital Bank inherited Sberbank’s network in the republic, and the new government became responsible for clearing debts and dealing with the funds in personal savings accounts. The freeze on bank accounts was supposed to be a temporary measure to give the banks of the newly independent states time to disentangle themselves from the old financial system and introduce their own national currencies.

But in Azerbaijan, the money remained in limbo, despite government promises to release the funds over the years.

On March 14, 2012, President Ilham Aliyev finally signed a decree ordering payments to reimburse creditors. The process will start in June this year and end in late 2013, with payments being made through Capital Bank.

The government envisages that the payouts will total one billion manats, or 1.27 billion dollars. The finance ministry says that from a figure of two million people with Sberbank savings as of January 1, the number of eligible claimants has grown to 2.4 million.

Some question this calculation, and predict that payments will go to a far smaller number because of a proviso that only people currently registered as resident in Azerbaijan will be able to claim funds.

The Nagorny Karabakh war displaced hundreds of thousands of Azerbaijanis and Armenians, and since then large numbers of Azerbaijani nationals have gone abroad to Russia and other countries in search of work. Ethnic Azerbaijanis who arrived as refugees from Armenia have their Soviet-era savings in that country, and cannot claim it from Capital Bank, even though it is the local successor to the same Sberbank where they once deposited money. (See Karabakh War Refugees Denied Soviet-Era Funds.)

Gadir Ibrahimli, a financial journalist with the Azadliq newspaper, estimates that the Azerbaijani state will end up paying less than half the one-billion-manat figure cited by the finance ministry.

Ali Alirzayev, a member of the ruling Yeni Azerbaijan Party and former deputy chairman of parliament’s economic affairs committee, welcomed the decision to return the money but expressed reservations about the amounts on offer.

He said that together with fellow-parliamentarian Settar Seferov, he devised a plan ten years ago that would have seen far higher payouts, especially for the smaller savers who account for over two-thirds of depositors and had less than 2,000 roubles in their accounts. His plan envisaged paying them back at a rate of one dollar to one rouble.

“Those who saved… up to 2,000 roubles were working-class people. They wanted to help their children out with those hard-earned savings,” he said. “The government should at least have paid that money out fairly. We are a wealthy country.”

Gular Ahmadova, a member of parliament who sits on Yeni Azerbaijan’s policy council, said creditors needed to realise that the government was doing all it could.

“Of course I would like people to get a higher percentage of their savings back,” she said. “However, if this is what the president has decided, it means there are strong reasons for it.”

Zahid Oruj, also a member of parliament, agreed that the restrictions were intended to limit the economic impact of a large injection of cash into the monetary system, and said the purpose of the payouts was to boost public confidence in the banking sector, which had been low ever since Sberbank collapsed.

“This presidential decree will make the banks function better,” he said.

With no prospect of an improved offer, Sberbank savers have little option but to lower their expectations.

Nigar Aliyeva, a pensioner in the western city of Ganja, said that as of 1992, her mother had saved 19,000 roubles which she was hoping to use to buy a house.

She says her mother, now 90, can expect to receive 1,450 manat, less than 1,900 dollars, which will just about cover her funeral expenses.

Shahla Sultanova is a freelance journalist in Azerbaijan.